BY FIDELITY MHLANGA
DESPITE Covid-19-related deaths that spiralled out of control at the height of the third wave between May and July, the country’s generally under-resourced life assurance companies honoured all claims, the Zimbabwe Association of Funeral Assurers (Zafa) said this week.
As the pandemic fatalities surged during the third wave, there were fears that sharp rises in payouts to affected policyholders would trigger the collapse of weaker players.
Pessimism also mounted following reports that about half of the sector’s players had failed to meet minimum capital requirements set by industry regulator, the Insurance and Pension Commission (Ipec).
Zafa general manager Taka Svosve said as the third wave ripped through Zimbabwe, operators fell under tremendous pressure to honour their obligations, even as they kept premiums at the same value.
This was despite the fact that inflationary pressures were also piling up and costs were rising.
“There was a general increase in the number of deaths from Covid-19, particularly during the third wave,” Svosve told a mentorship programme for insurance reporters.
“This led to a notable increase in funeral assurance claims during the same period. However funeral assurers continue to honour all claims irrespective of the cause of death.
“No claim was rejected on the basis that it was a Covid-19 death claim. The increase of claims was noted between June and July 2021,” he said.
Covid-19-related daily deaths breached the 100 mark on July 16, as new infections touched a worrying level of 2 296 within 24 hours.
The development sent shockwaves across the country, and shook boardrooms of funeral operators, who feared mortality rates could rise beyond their capacity.
As at October 11, 2021, Zimbabwe’s cumulative Covid-19 cases stood at 131 875, with 125 479 recoveries and 4 643 deaths.
Svosve said as most companies, banks included, were closed at the first stage of the lockdown, transactions were not flowing smoothly rendering premium collections a nightmare.
Only companies classified as “essential services” were allowed to open during the Covid-19-induced lockdowns, with the rest closed to prevent contagion.
Svosve said there was an abrupt stoppage of most business transactions when the first 21 days of the lockdown were introduced and premium inflows were affected.
“In terms of premium collection, some companies and individuals stopped generating income and it became difficult for funeral assurers to receive and follow up on their premiums as individuals and clients experienced some unexpected shocks in cash flows,” he said.
“In terms of premium collection, business activity was somehow reduced because of the lockdown restrictions put by the government in an effort to reduce infections.”
Svosve said while inflationary pressures were piling a huge burden on the sector, funeral assurers had deferred premium reviews after considering the fact that most policyholders’ sources of income had been affected.
“Both group and individual clients and their incomes were curtailed due to the Covid-19 lockdown. Therefore, they could not meet new premium increases under the circumstances,” he said.
“That left funeral assurers with no option but to defer any premium review. But this was obviously to the detriment of their cash flows and operational obligations.”
Svosve said there was an increase in demand for specialised personal protection equipment to deal with requirements of the pandemic.
This development increased unbudgeted costs and affected funeral assurers’ cash flows.
He said there was pressure from policyholders after certain contractual services were discontinued to curtail the spreading of Covid-19.
“In an effort to curb the spreading of Covid-19, funeral assurers had to suspend certain contractual services like offering mourners transport and chapel services. As much as funeral assurers were ready to pay cash in lieu for these services, policy holders preferred these services to be offered,” Svosve said.
According to Ipec’s 2021 first quarter report, the funeral assurance industry’s inflation adjusted gross premium written increased by 158,28% from ZW$22,03 million (US$250 000 at the current rate of ZW$88 to US$1) reported for the quarter ended March 31, 2020 to ZW$56,90 million (US$647 000) for the quarter ended March 31, 2021.
As at March 31, 2021, four out of the eight funeral assurers were compliant with the regulatory minimum capital requirement of ZW$62,50 million (US$710 227) as prescribed in Statutory Instrument 59 of 2020.
The funeral assurance sector’s total assets increased by 98,38% from ZW$867,90 million (US$9,9 million) as at December 31, 2020 to ZW$1,72 billion (US$19,6 million) as at March 31, 2021, according to Ipec.
Covid-19 cases have declined since August, but authorities have been warning people against complacency.